The Road to Rio Goes Through Los Cabos

Connecting the G-20 Summit to the Rio+20 Conference

If leaders at next week’s G-20 summit commit to a roadmap to phase out fossil-fuel subsidies, they can set the right tone for the forthcoming Rio+20 Conference, write Andrew Light and Rebecca Lefton.

The best thing the G-20 leaders can do to help the meeting in Rio succeed is to double  down on their core climate and energy commitment—phasing out fossil-fuel  subsidies—and creating a concrete roadmap to making it a reality. (AP/ Michael Sohn)
The best thing the G-20 leaders can do to help the meeting in Rio succeed is to double down on their core climate and energy commitment—phasing out fossil-fuel subsidies—and creating a concrete roadmap to making it a reality. (AP/ Michael Sohn)

The Group of 20 developed and developing nations will meet Monday in Los Cabos, Mexico, for their seventh meeting since the initial G-20 summit in November 2008, hosted by the George W. Bush administration in Washington, D.C. What will be the role of climate and energy issues at this latest summit?

This is an especially intriguing question since this G-20 meeting, unlike those that came before it, starts a week that will end with the U.N. Conference on Sustainable Development in Rio de Janeiro, Brazil—more commonly known as the Rio+20 Earth Summit. This once-in-a-decade event brings together thousands of participants from governments, the private sector, and civil society to focus on addressing poverty and sustainable development.

President Barack Obama will attend the G-20 meeting but not Rio+20, and other G-20 leaders are expected to make the same decision. For this and other reasons, some fear that the G-20 could upstage the Rio meeting.

But can the G-20, a relatively closed but highly influential meeting of the world’s largest economies, help set the stage for the Rio meeting, which, at this late date, is suffering from a lack of consensus on agreed goals? Yes. The best thing the G-20 leaders can do to help Rio succeed is to double down on their core climate and energy commitment—phasing out fossil-fuel subsidies—and creating a concrete roadmap to making it a reality. This will demonstrate that what the world needs now is concrete steps to real commitments instead of another series of empty proclamations.

The problem of the expanding G-20 agenda

The G-20 was created to replace the G-8 as the main forum on global economic cooperation and to also accommodate the fact that rising developing countries are playing an increasingly greater role in the global economy. It has evolved into a leaders’ forum and is one of the most important meetings on each year’s international diplomatic calendar.

But the G-20 was not designed to be a catch-all for every global problem. Canadian Prime Minister Paul Martin originally conceived it as a gathering of the finance ministers and central bank governors of the world’s largest economies, and it has always had a financial heart.

This tension between the G-20’s original intentions and its potential to address broader issues has led to a recurring concern over “mission creep.” Strictly limiting the agenda is necessary to have a regular day-and-a-half meeting in which these leaders can actually accomplish something. But since most of the world’s important problems are rooted in economics, it is understandably difficult to artificially limit the itinerary.

Take climate and energy concerns, for example. Since fossil fuels drive the global economy, it goes without saying that climate change is as much an economic challenge as anything. And given that the switch from fossil fuels to more sustainable alternatives is one of the biggest development opportunities, a plan out of the climate crisis must in part go through the world’s finance ministries. While it would be wrong to try to construct a global climate agreement in a forum like the G-20, it would also be a missed opportunity to not use this forum where appropriate.

We have seen this tension play out in the gradually increasing mention of climate and energy issues in the G-20 communiqué that ends each meeting. At the first summit in Washington in 2008, only 1 of the 95 commitments referenced in the communiqué was on climate and energy. The next year in London, this grew to 6 of 88, then 25 of 128 in Pittsburgh, with this trend continuing except for one meeting—the 2010 Toronto meeting, with only 4 of 61 commitments.

We know Mexico wants to put climate on the agenda this year. Of the five priorities they have set for the meeting, the fifth is to “promote sustainable development with focus on infrastructure, energy efficiency, green growth and financing the fight against climate change.” This inclusion should come as no surprise given Mexican President Felipe Calderón’s leadership on international climate issues.

After all, it was Mexico that orchestrated and delivered in Cancun in 2010 on creating a new bottom-up climate agreement—a promise originally made at the 2009 U.N. climate summit in Copenhagen. And it was President Calderón who introduced the idea of a global Green Climate Fund, now a reality, which will be the main component of the commitment made at the Cancun meeting to mobilize $100 billion annually for mitigation and adaptation to climate change by 2020. If successful, the fund could be the most significant part of global climate architecture through the rest of this decade.

So we can safely expect climate and energy to be a significant part of the G-20’s agenda. Indeed, the dates for these events were likely picked intentionally to encourage more G-20 leaders to attend the Rio meeting. The only problem is that many G-20 leaders have not taken the bait.

Is a robust climate and energy agenda in Mexico good or bad for the Rio meeting, which has been suffering from low expectations that it can actually achieve anything meaningful?

If the G-20 leaders take on more commitments than are agreed to in Rio—or worse, agree on new commitments that are perceived to be at odds with those that come out of Rio—this could effectively bury any chance that Rio will end in some kind of success. One clear message it could send, for example, is that while the leaders of the world’s 20 largest economies can agree on climate and energy priorities behind closed doors, the rest of the world is incapable of doing anything productive in a more open, bottom-up, democratic forum.

The G-20 summit in Mexico could help Rio if the G-20 leaders focus on the main climate-related commitment already on the their agenda—ending fossil-fuel subsidies—rather than going beyond it. But this will only help Rio if they do something they have not done so far: focusing the Mexico meeting on creating concrete plans to achieve this goal, rather than restating and adding more goals without a roadmap.

A focus on fossil-fuel subsidies

The G-20 can and should build momentum for the Rio meeting, and the best way to do so is to focus on establishing a roadmap for completing its signature commitment to date on climate and energy: the commitment made in Pittsburgh in 2009 in advance of the Copenhagen climate summit to phase out subsidies for fossil fuels in the medium term.

G-20 leaders issued a joint statement at Pittsburgh declaring their commitment:

To phase out and rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest. Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.

They renewed this commitment to end fuel subsidies the following year at the two 2010 summits in Toronto and again in Seoul, and asked the International Energy Agency, or IEA; the Organization of the Petroleum Exporting Countries, or OPEC; the Organisation for Economic Co-operation and Development, or OECD; and the World Bank to assess progress and report back for the next leaders’ summit.

These organizations’ joint report to the G-20 leaders in Cannes during the November 2011 summit estimates energy and greenhouse gas reductions based on an IEA analysis of fossil-fuel consumption-related subsidy removal in 37 countries. These countries include the largest subsidizers and represent 95 percent of emissions. Almost half of the countries analyzed by the IEA have implemented some fossil-fuel subsidy reforms or announced plans for reforms by 2011, but so far progress across the board by these countries has been uneven. Still, the OECD estimates that total greenhouse gas emissions from 2020 to 2050 could be between 3 percent and 4 percent less than estimates from several years ago due to the cutback on subsidies.

Further, the IEA analysis finds that eliminating fossil-fuel consumption subsidies in all of these 37 countries would reduce global energy demand by 4.1 percent relative to baseline projections and would cut 1.7 gigatons of carbon dioxide annually by 2020, or 4.7 percent.

Fossil-fuel reforms would also have net economic benefits in most instances. Subsidies in the 37 countries analyzed by the IEA come with a huge price tag: $409 billion in 2010 alone. The IEA estimates that by 2020 these economies will spend $660 billion per year, accounting for 0.7 percent of GDP. That’s on top of $45 billion to $75 billion per year for more than 250 aggregated fossil-fuel production or consumption subsidies in OECD countries between 2005 and 2010.

These figures are neither comprehensive nor inclusive of health costs or environmental costs associated with burning and producing fossil fuels. Inaction will cripple struggling economies and worsen strapped national budgets.

What’s more, these subsidies do not reach the poorest of the poor or the 1.3 billion people without access to modern, reliable electricity. The joint report notes that although providing basic energy services is a common goal of consumption subsidies, IEA analysis finds that only $35 billion of the $409 billion—8 percent—reached the bottom 20 percent.

These emissions reductions and costs figures are often cited in advocacy efforts promoting the removal of fossil-fuel subsidies at the G-20. Only 9 of the 37 economies IEA analyzed, however, are G-20 nations (Argentina, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, and South Korea). The report cautions that the countries reviewed are not necessarily representative of the G-20 countries. Further, the analysis does not determine whether the subsidies examined are “inefficient” as the G-20 has not defined this term.

Nevertheless, the G-20 commitment to phase out inefficient and wasteful fossil-fuel subsidies in conjunction with a similar commitment at the Asia-Pacific Economic Cooperation Economic Leaders’ Meeting in November 2010, along with rising energy prices, has undoubtedly built momentum on global actions to reduce fossil-fuel subsidies even though countries still have a long way to go before inefficient fossil-fuel subsidies are fully removed.

G-20 leaders reaffirmed their commitment to eliminating subsidies in Cannes last year, welcomed the joint report, and asked finance ministers and other officials to continue moving forward with reforms and report back. This year they must take this analysis and this legacy of commitments and turn it into a concrete action plan. By doing so, they could set exactly the right turn for the Rio meeting that ends the week.

Ramping up to Rio

One of the biggest sources of skepticism about the Rio+20 meeting is whether it can actually do anything meaningful. Part of the concern is the lack of an action plan for the most meaningful parts of the agenda.

As we argued in May, one of the most important agreements that could come out of Rio is U.N. Secretary General Ban-Ki Moon’s Sustainable Energy For All Initiative. It has three core goals:

  • Ensure universal access to electricity by 2030
  • Double the rate of energy-efficiency improvement by 2030
  • Double the share of renewable energy in the global energy mix by 2030

Like the fossil-fuel subsidy phase out, it’s an aspirational global goal rather than a binding international commitment. But like that goal it’s also something we can measure and use as a yardstick for success if a roadmap for achieving this goal is clearly articulated.

Take the energy-efficiency goals, for example. McKinsey & Company estimates that a global cumulative investment of $170 billion annually in energy efficiency will generate an internal rate of return of 17 percent, producing overall global savings of $900 billion per year. Meeting this goal would also reduce global energy consumption by 14 percent by 2030, avoiding the construction of approximately 1,300 midsize power plants.

What will give these goals bite, though, is if the Sustainable Energy For All Initiative, or whatever goals might be agreed to at the end of the meeting in Rio, are not just articulated as aspirations but as a commitment to creating a concrete process for actually achieving them. This means laying out a plan for sharing information that will allow countries to meet their part of each commitment and agreeing to burden-sharing agreements to help those countries that will have a harder road to achieving these ends.

And this is where the G-20 could lead by example. By starting the week out not only reaffirming their existing commitment to phasing out fossil-fuel subsidies but actually agreeing on a roadmap to making that commitment a reality, the G-20 parties could set a standard to be lived up to in Rio. Whether it is the Sustainable Energy for All Initiative or some other concrete commitment that emerges out of Rio, it will only be meaningful if it is accompanied by a roadmap, which very well could start a few hundred miles north in Los Cabos.

Andrew Light is a Senior Fellow and Rebecca Lefton is a Policy Analyst working on international climate policy at the Center for American Progress.

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Andrew Light

Senior Fellow

Rebecca Lefton

Senior Policy Analyst